Alan Bryce, interim head of the Fraud Advisory Panel and a non-executive committee member of the Tenancy Fraud Forum (TFF), argues that cracking down on tenancy fraud can help solve the local government financial crisis.
We are hearing ever more dire announcements about the state of English local authority finances. Eight councils are already effectively bankrupt, nearly one in five councils say they are likely to be bankrupt this year, and most recently a BBC survey noted that just over half of councils believe they will be bankrupt in the next five years. What can be done about it and who can help?
There are many factors driving this financial meltdown in local government but I would like to focus on just one of the most common causes - the lack of available social housing. In particular the beneficial impact that more effective tenancy fraud prevention and detection could have on local authority finance.
Recovering social homes from tenancy fraudsters offers the financial prize of a significant reduction in temporary accommodation costs for homeless families, that much is well known. However, the arguably more important prize is affordable, secure accommodation for many of the over 104,000 homeless families currently in temporary accommodation and the 1.2 million on the English housing waiting list. The impact in individual regions can be even more significant. London councils recently announced they were spending £90m every month now on homelessness. The situation is financially unsustainable.
Fighting tenancy fraud is of course not a panacea solution to the totality of councils’ financial woes but can make an important contribution. Only last month the London Borough of Ealing published a scheme to spend £150m on buying up housing to combat levels of homelessness in the borough. This plan repeated the success of an earlier initiative that spent £7.5m purchasing Aspect House to renovate into 31 housing units, the equivalent of £242,000 per unit. That such expenditure is cost effective demonstrates the financial pressure homelessness puts on councils.
Consideration should also be given to the cost effectiveness of recovering homes from tenancy fraudsters. After all, just one specialist investigator in London would be expected to typically recover around 10-15 properties from tenancy fraudsters annually, but at a fraction of the cost of building just one new home. Research has previously shown the benefits of professionalising the approach to tackling tenancy fraud – one study found that an investigator or housing officer with enhanced fraud awareness, typically detects nine times more tenancy frauds than those without an equivalent skill set.
The value to the taxpayer of fighting tenancy fraud is clear. Tenancy Fraud Forum (TFF) calculated that each detected council or housing association property in England that is recovered from a tenancy fraudster is worth on average £42,000 to the public purse over the length of an average fraud. In some parts of the country the savings are far higher. The Lost Homes, Lost Hope report noted that nearly 150,000 council and housing association properties are now subject to some form of tenancy fraud in England, a stark increase since similar research was published 12 years ago. There are several factors driving this increase including the cost of living crisis and affordability of purchasing homes or renting in the private sector.
The report also noted one major change in the last decade that has turbo charged a specific type of tenancy fraud, sub-letting, arising from the emergence of short term online sub-letting sites such as Air BnB and Bookings.com. The impact is unintentional, but that does not mean the financial harm to the public purse is any less. The disturbing aspect is that some of the most famous names in short term sub-letting platforms, despite repeated request for assistance from local authorities and housing associations, appear reluctant to play their part in the fight against this type of fraud.
One leading London counter fraud manager noted that a quarter of current sub-letting frauds under investigation are linked to short term lets, being advertised for rent on short term sub-letting platforms. The taxpayer has the right to ask three things of these short term sub-letting platforms: that they consistently check properties are not social housing before advertising for rent; when informed by a council or housing association that the property is social housing that property be quickly removed from the online advertising site; and that information that would aid the council or housing association investigation is provided when requested. Not much you would think but at the TFF we regularly hear that this is not happening.
Does this suggest for such letting sites that profit is being put before people? Not a good look for any organisation, just ask the Post Office. However, when the victims are local communities, taxpayers and above all homeless families, is it not about time for these online short term sub-letting platforms to step up and do the right thing.
